Court rules on condo lien deadlines

The Ontario Court of Appeal has confirmed that the 90-day deadline for condominium corporations to register liens applies when a unit owner fails to pay costs in compliance orders.

In CIBC Mortgages Inc. v. York Condominium Corporation No. 385, the Court of Appeal determined that a bank’s mortgage had priority over a condominium corporation’s lien, as it failed to perfect it according to the Condominium Act. The decision serves as an important reminder to lawyers that they need to keep careful track of when default occurs when registering a lien, says Denise Lash, a Toronto condo lawyer.

“When the demand for payment is made, that’s when the clock starts ticking,” says Lash, who was not involved in the decision.

In the underlying dispute, an Ontario judge granted a condominium corporation a compliance order against a unit owner.

The judge also awarded $15,000 in costs, payable within 30 days from the date of the order in Feb. 2011. The unit owner failed to pay this, as well as further costs and common expenses, which amounted to $113,616.

The condominium corporation registered a certificate of lien in Dec. 2011 for claimed common expenses and later sold the unit under lien to a third party for $110,000.

CIBC, which had granted a $135,000 mortgage to the owners, then started enforcement proceedings. At issue was whether the bank’s mortgage or condominium corporation’s lien had priority and when default had taken place.

The Court of Appeal upheld a lower court decision that ruled in CIBC’s favour. The application judge found that default had taken place on the costs order in March 2011, six months before the condo corporation filed its lien.

The decision also turned on the interplay between two sections of the Condominium Act — ss. 85(2) and 134(5). Section 85(2) of the act gives condo corporations three months after the unit owner’s default to register a lien. The bank’s position was that if a condo corporation has a court order setting a deadline, that is when the default happens and the clock starts to run on the 90-day limit.

The condo corporation, however, pointed to s. 134(5), which it argued says condo corporations can set the timetable for payment by a unit owner when they are awarded damages or costs. The Court of Appeal, however, found that the section is not intended to permit a condominium corporation to “enlarge the lien perfection period after a default in payment has already occurred.”

Benjamin Frydenberg, the lawyer for CIBC Mortgages, says the court struck a reasonable balance among the interests of the affected stakeholders.

“Had the court acceded to the position of the condominium corporation, essentially the lien claimant under a form of lien legislation would have an unfettered discretion as to when the clock starts to click for perfecting their own lien claim,” says Frydenberg, a partner in Chaitons LLP’s litigation group.

James Davidson, a partner with Davidson Houle Allen LLP, who was not involved in the case, says he was disappointed with the decision, as he had assumed that s. 134(5) allowed condo corporations to set a time period for payment. This would mean that there would not be a default until the specific due date had lapsed.

“I don’t see the great added risk to the mortgagee because of that little bit of delay,” he says.

Jonathan Fine, the lawyer representing the condo corporation, declined comment.

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